Are We Already Rebundling Mobile?

Hard to believe that it was only a year ago that the clear trend, led by Facebook’s Messenger App, and Foursquare’s Swarm App, was towards unbundling experiences on mobile and building single purpose, highly focused applications. Is the tide turning? Uber recently began rolling out UberEats across multiple markets, which as far as I can tell is its first permanent category extension*  – fundamentally distinct from UberKittens, UberFlowers, and CornerStore which have all been temporary or seasonal extensions.

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UberEats, like prior experiments, leverages the core in-app experience: its trademark horizontal sliding bar. I’m not alone in long thinking that Uber would roll-up the majority of profitable on-demand categories. But I’ve also struggled to conceive how they could maintain their hyper curated, efficient workflow which launching new verticals. To quote Andrew Weissman, Uber is about “reducing cognitive noise” - but if they built their brand on “reducing cognitive noise,” then how will consumers react when the music starts blaring?

And Uber’s not alone. The recent emergence of (and consumer interest in) Magic, GoButler, Operator, even Alfred, all represent a new aggregated, bundled, application layer on top of a slew of vertical specific, single-purpose services. Have we reached peak app capacity?

I don’t know.

As far as I can tell, the conversations began in mid-2012 with a blog penned by Albert Wenger of Union Square Ventures where he wrote:

The real problem, I am beginning to think, is more dramatic: the shift to mobile may make Facebook less relevant altogether.

Why? Mobile devices are doing to web services what web services did to print media: they unbundle.  On my phone another app is just a button push away and there is relatively little that fits on each screen.  So it is just as much effort to go to another part of the Facebook app as there is to go to a different app altogether.  So Facebook for mobile may not be Facebook at all but rather a combination of say Instagram, Kik, Twitter, Foursquare and others.

Benedict Evans in early 2014 penned an equally influential piece, noting:

On a desktop website, you could always add a feature as a new tab on your site navigation, and clicking that was easier than going to another web site. But on mobile, all apps are just two taps away, while there is very little room for links to more features in any given app’s home screen - they quickly get shoved into the ‘hamburger’ menu, and soon after fall into the ‘hamburger basement’, down below the bottom of the screen. This gives startups scope to unbundle features from larger companies' products, and also means those companies themselves unbundle their apps into separate single-function apps.

But what’s clear is that unbundling was never actually a universal phenomenon. In Why Mobile Bundling Isn’t Inevitable, Taylor Davidson argued that development across deep-linking and app extensions could reduce reliance on single-purpose platforms:

And it may cause us to rethink the notion of unbundling as well. If we don’t have to open an app to get something done, then why can’t a larger set of features be bundled? The US market isn’t inevitable: the Chinese Internet market is a perfect example of how we’ve seen a different kind of bundling emerge, with a different set of discovery challenges, because the services are aggregated differently.

The difference noted in the Chinese market, most fundamentally within WeChat and LINE, was broken down by Ben Thompson around the same time. Specifically, that these messaging platforms had become horizontal aggregators of commerce, games, search and discovery. Perhaps, he would note later in 2014, they were even evolving into the effective OS for mobile devices:

Were Uber to become ubiquitous, could businesses be built on top of it? What would such an operating system look like? An out-there idea to be sure, but in the realm of possibility.

More likely is that the messaging services become so dominant that they render the underlying mobile platform unimportant. This too would be similar to the effect of the Internet on the PC: the biggest reason the Mac was able to make a comeback from near death was because the Internet – and web apps – ran everywhere. It didn’t matter what browser7 or OS was on your actual PC. Similarly, if all essential apps and servers are routed through your messaging service, then the underlying OS – whether iOS or Android – is increasingly irrelevant.

It therefore makes sense that the recent spate of bundled aggregators are built on top of SMS – probably the platform ultimately most immune to horizontal extensions within the private messaging networks.

But something feels amiss. Why? I consider Jeff Jordan’s People Marketplaces to be a formative influence on my view of commerce:

Our hypothesis is that the horizontal plays may suffer from a potential “paradox of choice”: Consumers could be getting overwhelmed by the seemingly infinite array of potential service options presented by horizontal platforms, but consumers can easily understand the highly specialized value proposition of a company offering services in one vertical…From a product perspective, the vertical apps can tailor their workflow to the unique characteristics of that vertical—the best way to find someone to clean your house is different than the best way to find a ride.  And from a marketing perspective, a narrow focus on one vertical lets the company do things to potentially accelerate each side of the two-sided marketplace.

One last thought? Maybe the recent horizontal aggregators work because they leverage the workflows of the vertical players while offering a single-purpose point of entry for the consumer: SMS.

But if so, we’re left with one final conundrum from Jeff Jordan’s thesis - the principality of convenience versus value. He continues: “it appears that the early breakouts in the space are those that offer both convenience and value.  It’s clear that the market size of people who are willing and able to pay a premium for convenience is much, much smaller than those who are attracted to both convenience and value.”

The horizontal aggregators, by virtue of being aggregators, are fee-taking middlemen. They may increase convenience, but to the detriment of value. Yet bundling doesn't need to increase costs - in fact, the synergistic savings from managing a single product (as opposed to two) could well reduce operating costs - if the workflow isn't degraded to the point of lowered consumer demand. Maybe this, then, is the answer. As we move into a market cycle where the smart money is increasingly focused on business fundamentals, margins, and unit economics, perhaps bundled businesses simply make more long-term economic sense.

I know I'm not smart enough to answer the question. But I hope these thoughts are helpful to the continuing dialogue.

*You could argue that UberRush is a permanent product extension, but it's (a) only available in NYC whereas UberEats is in Chicago, LA, NYC & Barcelona and (b) UberRush doesn't require a fundamental infrastructure shift whereas UberEats theoretically must keep hot food hot, cold food cold, etc.